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Thread: Capacity of parties What do you understand by capacity to contract.

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    Word Icon 35px Jpg.ashx Capacity of parties What do you understand by capacity to contract.

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    Capacity of parties
    Q. Can contract be made by every person? Discuss fully. (2001)
    Q. What do you understand by capacity to contract.
    1. Introduction:
    Under contract act 1872 parties must be competent to contract. Every person is not competent to enter into contract unless he fulfills the conditions laid down in the contract act. A contract made by un-competent is void.
    2. Contractual capacity:
    Section 11 lays down that every person is competent to contract who is of the age of majority according to the law which he is subject and who is of sound minded, and is not disqualified from contracting by any law to which he is subject.
    3. Persons competent to contract:
    Following persons are competent to contract.
    (I) Adult:
    A person who is of 18 years of age is adult under contract act an adult can enter into contract.
    (II) Persons of sound mind:
    A personís soundness of mined depends on two facts
    (a) His ability to understand the business concerned and
    (b) His ability to form rational judgment as to its effect on his interests.
    Person usually of unsound minded:
    Person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.
    A person who is usually of sound minded:
    A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
    Example:
    A patient in a lunatic asylum, who is at intervals of sound mind, may contract during intervals.
    (III) Persons not disqualified by law:
    Persons should not be disqualified by law. If a person who is not disqualified by law he is capable to enter into contract.
    Person not competent to contract:
    (I) Minor:
    According to majority act 1875.
    ďA minor is a person who has not attained 18 years of age. Where a guardian of minorís person or property has been appointed under the guardian and wards act or court of wards has taken charge of minor property a minor will attain the age of majority after 21 years of age.Ē
    (a) Nature of minorís agreement:
    A minor is not competent to contract.
    A minorís agreement being void ab-initio has no validity in the eye of law.
    Doctrine of estoppels does not apply in case of minor.
    A minor can not be compelled to pay back the money received by him under an agreement which is void.
    A minor can be agent but he cannot be held personal for negligence or breach of duty.
    Where a minor and an adult jointly enter into agreement with another person, the minor is not held responsible but only adult would be liable. The parent can be held liable if the minor acts as an agent of the parents.í
    A minor can not be declared insolvent.
    A minor can be beneficiary or promise.
    (II) Persons of unsound mind:
    Mentally deficient person can not make a valid contract.
    (a) Causes of unsoundness of mind:
    Following are causes of unsoundness of mind.
    (i) Idiocy
    (ii) Insanity
    (iii) Drunkenness
    (iv) Hypnotism
    (v) Old-age
    (b) Effect of agreement:
    An agreement made by a person of unsound mind is void ab-initio.
    (c ) Burden of proof:
    The burned of proof lies on the party who wants cancel the contract.
    Case law 1994 M. L. D 1856
    It was held that where it was not proved that executants of sale-dead suffered from defect of lunacy and was incapable to sell his property in circumstances, the sale was sufficiently established on record.
    (III) Persons disqualified by law:
    If a person is disqualified by law he cannot enter into contract.
    Following cannot make contract.
    (a) Joint stock company:
    Joint, stock company can not make contract personally because it has an artificial personality.
    (b) Foreigner:
    A foreigner can not make contract.
    © Convict:
    A convict undergoing imprisonment is incapable of entering into contract.
    (d ) Insolvent:
    Insolvent person declared by court of law is not competent to contract.
    (e) Diplomate or ambassador:
    Ambassadors envoys and diplomat are not competent to contract.
    5. Conclusion:
    To conclusion it can be said that, every person is not competent to enter into valid contract. An agreement which is made by person not qualified to contract is void. Minor. Mentally deficient, and persons disqualified by law have no contractual capacity.

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